Ch. 1-3 Flashcards

1
Q

FV =

A

principal + interest

C1 (1 + r)

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2
Q

NPV steps

A
  1. PV of future cash flows
  2. NPV = PV of future flows - required investment
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3
Q

PV

A

C1/1+r

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4
Q

declining discount factors

A

1 > DF1 > DF2 > DF3

time value of money

absence of arbitrage (risk-less profit)

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5
Q

perpetuity

A

C/r

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